Comfort Systems USA Reports Third Quarter Results; Solid Profitability, Increased Backlog in a Challenging Economy; Strong Cash Flow and Debt Reduction.Business Editors HOUSTON--(BUSINESS WIRE)--Nov. 4, 2002 Comfort Systems USA Inc. (NYSE NYSE See: New York Stock Exchange :FIX), a leading provider of commercial/industrial heating, ventilation ventilation, process of supplying fresh air to an enclosed space and removing from it air contaminated by odors, gases, or smoke. Proper ventilation requires also that there be a movement or circulation of the air within the space and that the temperature and and air conditioning air conditioning, mechanical process for controlling the humidity, temperature, cleanliness, and circulation of air in buildings and rooms. Indoor air is conditioned and regulated to maintain the temperature-humidity ratio that is most comfortable and healthful. ("HVAC (Heating Ventilation Air Conditioning) In the home or small office with a handful of computers, HVAC is more for human comfort than the machines. In large datacenters, a humidity-free room with a steady, cool temperature is essential for the trouble-free ") services, today announced net income of $3,740,000 or $0.10 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the quarter ended Sept. 30, 2002, as compared to net income of $5,642,000 or $0.15 per diluted share, in the third quarter of 2001. These amounts include results of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Excluding these items, net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the quarter was $3,775,000 or $0.10 per diluted share as compared to $1,420,000 or $0.04 per diluted share in third quarter of 2001. The Company reported revenues from continuing operations of $214,691,000 in the current quarter as compared to $234,070,000 in 2001. Bill Murdy, Comfort Systems USA's chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , said, "We are pleased to have posted another quarter of solid results in a very challenging economic and industry environment. Our operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was comparable to second quarter levels, while both gross profit and earnings before interest, taxes and depreciation EBITD is an initialism or acronym for Earnings Before Interest, Taxes and Depreciation. See EBITDA. Some people find it useful to know this value for a business. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) improved. Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. increased for the third consecutive quarter and was 10% higher than last year. Our substantial progress in strengthening our balance sheet enabled us to reduce interest expense and report increased earnings from continuing operations as compared to last year." Free cash flow for the third quarter was $11,336,000. The Company has now generated positive free cash flow in nine of the last ten quarters. Total debt outstanding at Sept. 30 was $16,357,000, its lowest level of debt in over five years. The Company also previously announced a new $55 million long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. facility, which may be expanded to $75 million through a syndication See syndication format. to additional lenders in the future. Bill Murdy continued, "Comfort Systems USA's financial position and capacity are important competitive advantages for the Company, both in weathering tough industry conditions as well as maintaining flexibility to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. growth opportunities. We will continue to focus on our balance sheet as a strategic asset of the Company." The Company reported a net loss for the nine months ended Sept. 30, 2002 of $208,746,000 or $5.47 per diluted share, as compared to net income of $10,033,000 or $0.27 per diluted share, in 2001. As disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). earlier this year, the nine months' results include two significant charges for unusual items - one relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the adoption of a new accounting standard for reporting of goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , and another relating to the Company's sale this year of certain operations, principally 19 units sold to Emcor Group EMCOR Group NYSE: EME is a Fortune 500 company based in Norwalk, Connecticut. This company's businesses include mechanical and electrical construction, energy infrastructure, and facilities services. Inc. in March. Excluding these items, the Company reported net income from continuing operations of $5,079,000 or $0.13 per diluted share for the first nine months of 2002 as compared to $328,000 or $0.01 per diluted share for the first nine months of 2001. The Company reported revenues of $616,053,000 from continuing operations for the current year to date, as compared to $664,629,000 in 2001. The Company separately announced that it had named Norman Norman, city (1990 pop. 80,071), seat of Cleveland co., central Okla.; inc. 1891. It is the center of a livestock region. Oil wells, food processing, and printing and publishing contribute to the economy, and there is diverse manufacturing (machinery, communication C. Chambers, an energy and construction industry veteran, as president and director, and that it had also elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. H. Schultz Schultz may refer to People:
Trane, a business of American Standard Companies, is a global provider of heating, ventilating and air conditioning (HVAC) systems and building management systems and controls. Company's HVAC industry-leading Commercial Systems group, to its board of directors. Bill Murdy concluded, "While the near-term near-term adj. Of, for, or involving a short period of time in the near future. economic environment remains difficult, we are steadily moving Comfort Systems USA forward. With a strong balance sheet, a growing backlog, and superb additions to our team in Norm Chambers and Jim Schultz, we continue to build Comfort Systems USA for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. success in the commercial HVAC and controls industry." The Company will host a conference call to discuss its financial results and position in more depth on Tuesday Tuesday: see week. , Nov. 5, 2002 at 9:00 a.m. Central Time. The call-in call-in adj. Being in a format such that listeners or viewers are invited to have their telephone conversations with the host or guests on a show broadcast to other listeners: a call-in radio show. n. number for this conference call is 630/395-0031. A replay of the entire call will be available until 9:00 a.m. Central Time, Tuesday, Nov. 12, 2002 by calling 402/998-0142. Comfort Systems USA is a premier provider of business solutions addressing workplace comfort, with 84 locations in 57 cities around the nation. For more information, visit the Company's website at www.comfortsystemsusa.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on the current plans and expectations of Comfort Systems USA, Inc. and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include, among others, the lack of a combined operating history and the difficulty of integrating formerly separate businesses, retention of key management, a national downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. or one or more regional downturns in construction, shortages of labor and specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. building materials Building materials used in the construction industry to create . These categories of materials and products are used by and construction project managers to specify the materials and methods used for . , difficulty in obtaining or increased costs associated with debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay or bonding, seasonal fluctuations in the demand for HVAC systems and the use of incorrect Incorrect means to not be correct and may also refer to:
Financial table follows
Comfort Systems USA Inc.
Consolidated Statements of Operations
For the Three Months and Nine Months Ended
September 30, 2002 and 2001
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
Sept. 30,
-----------------------------------
2002 % 2001 %
--------- ------ ---------- ------
Revenues $214,691 100.0% $234,070 100.0%
Cost of services 174,668 81.4% 189,426 80.9%
--------- ----------
Gross profit 40,023 18.6% 44,644 19.1%
SG&A 32,046 14.9% 35,449 15.1%
Goodwill amortization - - 2,056 0.9%
Restructuring charges - - - -
--------- ----------
Income from operations 7,977 3.7% 7,139 3.0%
Interest expense, net 939 0.4% 1,840 0.8%
Other expense (115) (0.1%) (50) -
--------- ----------
Income before taxes 7,153 3.3% 5,349 2.3%
Income taxes 3,378 3,929
--------- ----------
Income from continuing operations 3,775 1.8% 1,420 0.6%
Discontinued operations:
Operating income (loss), net of
applicable income tax benefit
(expense) of $20, $(2,835)
$1,942 and $(6,664) (35) 4,222
Estimated loss on disposition,
including income tax expense
of $25,887 - -
--------- ----------
Income (loss) before cumulative
effect of change in accounting
principle 3,740 5,642
Cumulative effect of change in
accounting principle, net of income
tax benefit of $26,317 - -
--------- ----------
Net income (loss) $3,740 $5,642
========= ==========
Income (loss) per share:
Basic-
Income from continuing operations $0.10 $0.04
Discontinued operations -
Income (loss) from operations - 0.11
Estimated loss on disposition - -
Cumulative effect of change in
accounting principle - -
--------- ----------
Net income (loss) $0.10 $0.15
========= ==========
Diluted -
Income from continuing operations $0.10 $0.04
Discontinued operations -
Income (loss) from operations - 0.11
Estimated loss on disposition - -
Cumulative effect of change in
accounting principle - -
--------- ----------
Net income (loss) $0.10 $0.15
========= ==========
Shares used in computing income
(loss)
per share:
Basic 37,834 37,468
Diluted 38,131 37,773
Income from operations, excluding
restructuring charges, Kmart
reserve reversal and goodwill
amortization $7,977 3.7% $9,195 3.9%
EBITDA, excluding restructuring
charges and Kmart reserve
reversal $9,663 4.5% $11,213 4.8%
Income (loss) from continuing
operations (after tax), excluding
restructuring charges, Kmart
reserve reversal and goodwill
amortization $3,775 1.8% $3,315 1.4%
Diluted earnings per share-income
(loss) from continuing operations
(after tax), excluding restructuring
charges, Kmart reserve reversal and
goodwill amortization $0.10 $0.09
Nine Months Ended
Sept. 30,
------------------------------------
2002 % 2001 %
----------- ------ ---------- ------
Revenues $616,053 100.0% $664,629 100.0%
Cost of services 506,843 82.3% 540,493 81.3%
----------- ----------
Gross profit 109,210 17.7% 124,136 18.7%
SG&A 95,029 15.4% 106,371 16.0%
Goodwill amortization - - 6,170 0.9%
Restructuring charges 1,878 0.3% 238 -
----------- ----------
Income from operations 12,303 2.0% 11,357 1.7%
Interest expense, net 3,902 0.6% 6,762 1.0%
Other expense (1,229) (0.2%) (372) (0.1%)
----------- ----------
Income before taxes 9,630 1.6% 4,967 0.7%
Income taxes 4,551 4,639
----------- ----------
Income from continuing
operations 5,079 0.8% 328 -
Discontinued operations:
Operating income (loss), net of
applicable income tax benefit
(expense) of $20, $(2,835)
$1,942 and $(6,664) (148) 9,705
Estimated loss on disposition,
including income tax
expense of $25,887 (11,156) -
----------- ----------
Income (loss) before cumulative
effect of change in accounting
principle (6,225) 10,033
Cumulative effect of change in
accounting principle, net of
income tax benefit of $26,317 (202,521) -
----------- ----------
Net income (loss) $(208,746) $10,033
=========== ==========
Income (loss) per share:
Basic-
Income from continuing
operations $0.14 $0.01
Discontinued operations -
Income (loss) from operations - 0.26
Estimated loss on disposition (0.30) -
Cumulative effect of change in
accounting principle (5.37) -
----------- ----------
Net income (loss) $(5.53) $0.27
=========== ==========
Diluted -
Income from continuing
operations $0.13 $0.01
Discontinued operations -
Income (loss) from operations (0.01) 0.26
Estimated loss on disposition (0.29) -
Cumulative effect of change in
accounting principle (5.30) -
----------- ----------
Net income (loss) $(5.47) $0.27
=========== ==========
Shares used in computing income
(loss) per share:
Basic 37,736 37,411
Diluted 38,192 37,449
Income from operations, excluding
restructuring charges, Kmart
reserve reversal and goodwill
amortization $13,381 2.2% $17,765 2.7%
EBITDA, excluding restructuring
charges and Kmart reserve
reversal $18,347 3.0% $23,459 3.5%
Income (loss) from continuing
operations (after tax),
excluding restructuring charges,
Kmart reserve reversal and
goodwill amortization $5,780 0.9% $6,168 0.9%
Diluted earnings per share-income
(loss) from continuing
operations (after tax),
excluding restructuring charges,
Kmart reserve reversal and
goodwill amortization $0.15 $0.16
Note 1: The diluted earnings per share data presented above reflects
the dilutive effect, if any, of stock options and convertible
notes which were outstanding during the periods presented.
Note 2: EBITDA is defined as income (loss) from operations, excluding
depreciation and amortization. EBITDA may be defined differently
by other companies. EBITDA is presented because it is a financial
measure that is frequently requested by capital market
participants in evaluating the Company. However, EBITDA is not
considered under generally accepted accounting principles as a
primary measure of an entity's financial results, and accordingly,
EBITDA should not be considered an alternative to operating
income, net income, or cash flows as determined under generally
accepted accounting principles and as reported by the Company.
Note 3: The bottom two lines on the above table show income (loss)
from continuing operations (after tax) and related earnings per
share information excluding restructuring charges, Kmart reserve
reversal and goodwill amortization. The tax rate on these items
was computed using the pro forma effective tax rate of the Company
exclusive of these charges.
Comfort Systems USA Inc.
Condensed Consolidated Balance Sheets
(in thousands)
Sept. 30, Dec. 31,
2002 2001
----------- ---------
(unaudited)
Cash and cash equivalents $10,625 $3,924
Accounts receivable, net 168,398 175,028
Costs and estimated earnings in excess of
billings 20,359 19,384
Assets related to discontinued operations 1,248 327,820
Other current assets 24,857 33,299
----------- ---------
Total current assets 225,487 559,455
Property and equipment, net 16,543 18,812
Goodwill 113,427 297,033
Other noncurrent assets 13,789 1,325
----------- ---------
Total assets $369,246 $876,625
=========== =========
Current maturities of long-term debt $1,589 $2,447
Accounts payable 57,915 57,489
Billings in excess of costs and estimated
earnings 27,713 26,663
Liabilities related to discontinued operations 143 140,746
Other current liabilities 61,754 52,685
----------- ---------
Total current liabilities 149,114 280,030
Long-term debt 14,768 179,581
Other long-term liabilities 25 3,193
----------- ---------
Total liabilities 163,907 462,804
Total equity 205,339 413,821
----------- ---------
Total liabilities and equity $369,246 $876,625
=========== =========
Note 1: The Company's balance sheet as of Dec. 31, 2001 included
$327,820 in assets and $140,746 of liabilities related to
discontinued operations, substantially all of which have since
been sold. Additionally, the Company reduced its yearend goodwill
asset balance related to continuing operations by $183,606 in
connection with adopting SFAS No. 142 in the first quarter of
2002.
Selected Cash Flow Data:
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------- --------------------
2002 2001 2002 2001
--------- --------- ---------- ---------
Cash flow from operating
activities $12,114 $9,772 $13,807 $41,778
Cash flow from investing
activities $(844) $(1,378) $151,785 $(3,218)
Cash used in financing
activities $(13,269) $(10,411) $(165,592) $(39,446)
Free cash flow $11,336 $8,384 $11,093 $37,596
Note 1: Free cash flow is defined as cash flow from operating
activities less customary capital expenditures plus the proceeds
from asset sales. Free cash flow may be defined differently by
other companies. Free cash flow is presented because it is a
financial measure that is frequently requested by capital market
participants in evaluating the Company. However, free cash flow is
not considered under generally accepted accounting principles as a
primary measure of an entity's financial results, and accordingly
free cash flow should not be considered an alternative to
operating income, net income, or cash flows as determined under
generally accepted accounting principles and as reported by the
Company.
Note 2: Cash flow information for 2001 includes the results of
discontinued operations, including the 19 operations sold to Emcor
in the first quarter of 2002.
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